Entrepreneurs Find Fertile Ground in Cuba

Opinions expressed by Forbes Contributors are their own.
Recent technology advances have given manufacturers the ability to
quickly and inexpensively design products for local markets. Not all
such products are high-tech, however; sometimes they’re the exact opposite.

In 2008, for example, the Indian automaker Tata Motors introduced the
four-passenger Nano, an inexpensive no-frills car that originally cost
around $2,000. Prices have risen since then, but the concept still
holds: Give consumers a simple, useful product they can afford – in this
case, basic transportation.

Today, several other companies have begun competing in the low-cost auto
niche in an effort to reach similar customers, including Bajaj and
Maruti Suzuki in India and Chery and Geely in China.

Localization takes on other forms as well. The Chinese appliance maker,
Haier, found that repairmen were being called to unclog the drain pipes
of customers’ clothes washers in rural China. The reason for the clogged
drains, they discovered, was that customers were using the machines to
wash sweet potatoes. Haier responded by modifying the machines to
include a “vegetable wash” cycle.

This isn’t much different than what U.S. entrepreneurs Horace Clemmons
and Saul Berenthal have in mind in Cuba. With permission from the U.S.
and Cuban governments, the former IBM colleagues are planning to
manufacture inexpensive, low-tech tractors for the island’s small
farmers, which should enable them to increase production. The tractors
will not only be built for Cuba, but in Cuba.

There’s certainly a need there. Even with one in five Cuban workers
involved in agriculture, the country currently imports about 80% of its
food. Increasing the productivity of the island’s private farmers, who
recently were given government permission to sell some of what they
grow, could change that.

Manufacturing and markets go hand in hand, of course. I’ve written
before about the millions of global consumers who a few years ago were
scratching out subsistence livings in Africa, Asia and Latin America,
but today are working in factories, assembly plants and call centers,
purchasing many of their daily needs from others.

The buying power of these hundreds of millions of entry-level consumers
created new markets and unprecedented opportunities for companies
willing and able to produce simple, low-cost products designed with
these consumers’ needs in mind, rather than stripped-down versions of
Western products.

Many companies rose to the challenge. Some, like Tata and Haier, got in
early. Those forward-looking and nimble enough to create lower-end
products with fewer bells and whistles are now reaping the rewards.

In 2012, when my colleague Michael Silverstein wrote The $10 Trillion
Prize, he calculated that between 2010 and 2020, Chinese and Indian
consumers alone would purchase some $64 trillion in goods and services.

Chinese consumers, he estimated, would spend some $41.5 trillion, with
annual expenditures increasing from $2 trillion in 2010 to more than $6
trillion a year in 2020. Last year, at the half-way mark, consumer
spending was in the neighborhood of $4.2 trillion.

Indians, Silverstein estimated, would spend a total of $22.5 trillion,
with annual spending rising from $991 million in 2010 to $3.6 trillion
in 2020. Last year, at the half-way point, the total was around $1.3
trillion.

The buying power of these hundreds of millions of entry-level consumers
created new markets and unprecedented opportunities for companies
willing and able to produce simple, low-cost products designed with
these consumers’ needs in mind, rather than stripped-down versions of
Western products.

Many companies rose to the challenge. Some, like Tata and Haier, got in
early. Those forward-looking and nimble enough to create lower-end
products with fewer bells and whistles are now reaping the rewards.

In 2012, when my colleague Michael Silverstein wrote The $10 Trillion
Prize, he calculated that between 2010 and 2020, Chinese and Indian
consumers alone would purchase some $64 trillion in goods and services.

Chinese consumers, he estimated, would spend some $41.5 trillion, with
annual expenditures increasing from $2 trillion in 2010 to more than $6
trillion a year in 2020. Last year, at the half-way mark, consumer
spending was in the neighborhood of $4.2 trillion.

Indians, Silverstein estimated, would spend a total of $22.5 trillion,
with annual spending rising from $991 million in 2010 to $3.6 trillion
in 2020. Last year, at the half-way point, the total was around $1.3
trillion.

While the Cuban market is by comparison tiny, as I noted earlier this
year, Clemmons and Berenthal are right not to ignore it. I gave the
reason in my 2008 book, GLOBALITY, “No market is too small or remote to
offer some kind of valuable resource, cost advantage, or market
opportunity.” That holds for Cuba.

A small, inexpensive, stripped-down, low-tech tractor wouldn’t be
appropriate for most U.S. farms. But it may be just the right medicine
for Cuba’s malnourished agricultural sector.

For Cuban farmers, Clemmons and Berenthal provide a valuable solution.

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